Originally published April 18, 2012
Keywords: California, duty free-meal periods, rest period requirements
On April 12, 2012, the California Supreme Court issued its long-awaited decision on the scope of an employer's obligation under California law to "provide" employees with meal and rest periods. (Brinker Restaurant Corp., et al. v. Superior Court of San Diego County (Hohbaum, et al.), California Supreme Court, Case # S166350, 4/12/2012.) This decision, which is a significant victory for employers, will be of interest to all businesses with California employees.
More specifically, the Supreme Court held that employers satisfy their obligation under California law to provide duty-free meal periods by making them available, but need not ensure that employees actually take the meal periods. This resolved a legal issue that has perplexed employers in their efforts to develop and implement meal period policies, and has been at the heart of many, if not most, of the large number of meal and rest period cases filed in California in the last decade. In addition, the court clarified an important issue of class certification law that had divided the lower courts, holding that a court considering a motion to certify a class must resolve disputed legal or factual issues that were necessary to determine whether common issues predominated over individualized ones.
The Brinker Action
California law generally requires employers to provide their nonexempt employees with a 30-minute meal period for each day that they work more than five hours, and to authorize and permit a 10-minute rest period for each day that they work more than three and one-half hours. These meal and rest period requirements are codified in section 512 of the California Labor Code and in Wage Orders issued by the Industrial Welfare Commission. Wage Orders are as binding on employers as statutes.
The Labor Code and the Wage Orders address meal periods, and the Wage Orders prescribe rest periods. Employers are prohibited from requiring employees to work during any meal or rest period mandated by statute or Wage Order. Employers that violate these requirements must pay employees premium wages in the amount of one additional hour of pay at the employee's regular rate of compensation for each work day that a meal or rest period is not provided.
In Brinker, five hourly, nonexempt employees filed a putative class action alleging that Brinker (i) failed to provide employees with rest breaks, or premium wages in lieu of rest breaks, as required by California law, (ii) failed to provide employees the meal breaks, or premium wages in lieu of meal breaks, as required by California law, and (iii) required employees to work off-the-clock during meal periods and engaged in time shaving (i.e., unlawfully altering employee time records to misreport the amount of time worked and break time taken).
The trial court certified a number of subclasses, including a "meal period subclass," a "rest period subclass" and an "off-the-clock subclass," finding that common factual issues predominated over individualized factual issues with respect to each of those subclasses. The Court of Appeal reversed as to all three subclasses, holding that the Superior Court had committed error per se by ruling on class certification without first resolving the legal disputes over the scope of Brinker's duties to provide meal and rest periods. The Court of Appeal further held that any court, upon resolving those disputes, could only have concluded that class certification was inappropriate. The Supreme Court granted review "to resolve uncertainties in the handling of wage and hour class certification motions."
Scope of Employers' Obligation to Provide Meal Period
The Labor Code and the Wage Orders generally provide, with narrow exceptions, that, absent a waiver, employers must provide a first 30-minute meal period by the end of the fifth hour of work and, absent a waiver, must provide a second 30- minute meal period by the end of the tenth hour of work.
Plaintiffs contended that an employer is obligated to "ensure that work stops for the required thirty minutes." Brinker contended that an employer is obligated only to make meal periods available, not ensure that employees actually take them.
The Supreme Court agreed with Brinker and held that "an employer must relieve the employee of all duty for the designated period, but need not ensure that the employee does no work." The Supreme Court warned, however, that "an employer may not undermine a formal policy of providing meal breaks by pressuring employees to perform their duties in ways that omit breaks" and that "the wage orders and governing statutes do not countenance an employer's exerting coercion against the taking of, creating incentives to forego, or otherwise encouraging the skipping of legally protected breaks." Moreover, an employer must pay for any time it knows or has reason to know that its employees worked during meal periods. Significantly, the Supreme Court recognized that what is sufficient to satisfy California's meal period rules will "vary from industry to industry."
The Supreme Court also rejected plaintiffs' contention that the applicable Wage Order required Brinker to provide a meal period every five hours. Plaintiffs had alleged that Brinker's practice of requiring "early lunching," i.e., taking a meal period soon after the beginning of a work shift, followed by six or more hours without an additional meal period, did not comply with the Wage Order. The Supreme Court disagreed with plaintiffs' "rolling five-hour" contention, holding that the applicable Wage Order imposes no other timing restrictions: "Under the wage order, as under the statute, an employer's obligation is to provide a first meal period after no more than five hours of work and a second meal period after no more than 10 hours of work."
Scope of Employers' Obligation to Provide Rest Period
The Supreme Court next addressed how often an employer must allow rest periods. This obligation is defined solely by the Wage Orders, which, for most industries and occupations, provide that employers must "authorize and permit all employees to take rest periods, which insofar as practicable shall be in the middle of each work period." The rest period time must be "based on the total hours worked daily at the rate of ten minutes net rest time per four hours or major fraction thereof." However, employers need not authorize a rest period for employees whose total daily work time is less than three and one-half hours.
The Supreme Court held that the Court of Appeal misconstrued this last provision to define a "major fraction" of four hours of work to be at least three and one-half hours. Under that interpretation, employees would be entitled to a 10-minute rest period only if they worked a shift of three and one-half hours or more, and to a second 10-minute rest period only if they worked a shift of seven and one-half hours or more. The Supreme Court ruled that, except for the first four-hour work period, the phrase "major fraction thereof" as applied to a four-hour period means any amount of time in excess of two hours—i.e., any fraction greater than half. Accordingly, employees are entitled to a 10- minute rest break for working shifts from three and one-half hours to six hours in length, another 10-minute rest break for shifts of more than six hours up to 10 hours, and another 10-minute rest break for shifts of more than 10 hours up to 14 hours, and so on.
Finally, the Supreme Court rejected plaintiffs' claim that employers have a legal duty to permit their employees a rest period before any meal period. The Supreme Court disagreed and found that the Wage Orders do not specify the sequence of meal and rest breaks. The only constraint on timing of rest periods is that they must be authorized "insofar as practicable . . . in the middle of each [four hour] work period." Thus, "[e]mployers are ... subject to a duty to make a good faith effort to authorize and permit rest breaks in the middle of each work period, but may deviate from that preferred course where practical considerations render it infeasible."
Standards for Class Certification
In addition to clarifying the meal and rest break standards, the court resolved a long-standing dispute between the plaintiff and defense bars as to whether merits consideration may be analyzed within the context of a motion for class certification. The Supreme Court answered the question in the affirmative, reasoning that whether common or individual questions predominate will often depend upon resolution of issues closely tied to the merits. For example, "whether reliance or a breach of duty can be demonstrated collectively or poses insuperable problems of individualized proof may be determinable only after closer inspection of the nature of the reliance required or duty owed and, in some instances, resolution of legal or factual disputes going directly to the merits." Although the trial courts may look into the merits of a claim, however, they need not resolve every threshold dispute over the elements of a claim, and should do so only to make determinations that are necessary to decide class certification.
In sum, when presented with a class certification motion:
... a trial court must examine the plaintiff's theory of recovery, assess the nature of the legal and factual disputes likely to be presented, and decide whether individual or common issues predominate. To the extent the propriety of certification depends upon disputed threshold legal or factual questions, a court may, and indeed must, resolve them. Consequently, a trial court does not abuse its discretion if it certifies (or denies certification of) a class without deciding one or more issues affecting the nature of a given element if resolution of such issues would not affect the ultimate certification decision.
The Supreme Court's unanimous opinion did not discuss the validity of statistical evidence—a device relied upon by plaintiffs in many employment class actions—to establish liability. Nevertheless, the concurring opinion of two justices (including Justice Werdegar, the author of the Court's opinion) suggests that representative testimony, surveys, and statistical analysis may be used as tools to "render manageable determinations of the extent of liability." Their suggested approach differs with the United States Supreme Court, as set forth in Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541, 2561 (2011), which unanimously rejected so-called "trial by formula," and a recent California Court of Appeal decision in Duran v. U.S. Bank National Association, 203 Cal.App.4th 212, 258- 259 (2012), petition for review filed, No. S200923 (Mar. 19, 2012), which followed Dukes. If it chooses to review Duran, the Supreme Court may face another important question in the near future about the use of statistical or sample evidence.
Rulings on Class Certification
In finding that the propriety of a certifying a class may hinge on the resolution of a disputed merits question at the threshold, the Supreme Court resolved the certification issues as follows. With regard to the meal break subclass, it remanded the question of whether certification was proper after resolving the legal standard that employers are not required to make meal periods available every five hours. That new articulation of the California Labor Code rendered the definition of the meal period subclass overinclusive because it captured class members who had not received meal periods on a "rolling" five-hour basis. Presumably, on remand, plaintiffs may try to obtain certification by presenting evidence that Brinker had adopted a policy of effectively preventing employees from taking meal breaks.
With regard to the rest period subclass, however, the Supreme Court upheld the trial court's certification order because plaintiffs presented evidence that Brinker Restaurants had adopted a uniform corporate rest-break policy that did not give full effect to the "major fraction" language in the Wage Order just reviewed. The Supreme Court found that plaintiffs had presented substantial evidence of a common uniform break policy that authorized rest breaks only for each full four-hour work period. It held that "[c]laims alleging that a uniform policy consistently applied to a group of employees is in violation of the wage and hour laws are of the sort routinely, and properly, found suitable for class treatment." The Supreme Court also disagreed with the Court of Appeal's conclusion that individual questions would predominate because employees may waive rest periods. To the contrary, the Supreme Court held that "[n]o issue of waiver ever arises for a rest break that was required by law but never authorized."
Finally, the Supreme Court held that the trial court's certification of the off-the-clock subclass was an abuse of discretion. It reasoned that plaintiffs had not presented substantial evidence of a common policy for employees to work off-the-clock and that there was no common method of proving that Brinker knew or should have known that off-the-clock work was occurring. In fact, the Supreme Court found that the only formal Brinker off-the-clock policy submitted prohibited off-the-clock work (consistent with state law). Plaintiffs also had not presented substantial evidence of a systematic company policy to pressure or require employees to work off-the-clock, or substantial evidence that Brinker knew or should have known that employees were working off-the-clock. Thus, certification was improper: "On a record such as this, where no substantial evidence points to a uniform, companywide policy, proof of off-the-clock liability would have had to continue in an employee-by-employee fashion, demonstrating who worked off the clock, how long they worked, and whether Brinker knew or should have known of their work."
The Brinker decision is a significant victory for California employers. It finally establishes that in providing meal and rest periods, California employers do not have to ensure that they are taken. The Court's ruling also gives employers some flexibility regarding meal and rest periods, so long as no company policy conflicts with the requirements of the Labor Code or Wage Orders. Finally, the decision provides some welcome structure to class certification analysis in the California courts.
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